Loans

The kind of loan you need depends on your situation.  Here are some common loan types.

A mortgage is a loan used to purchase a home. Mortgages can cover single family homes, multifamily homes, town houses, condominiums and co-ops. Mortgage companies will usually only lend 80% of a home’s value, so if you cannot make a down payment of at least 20%, you may need to get private mortgage insurance or PMI.

A HELOC is a home equity line of credit. It’s a credit line secured by the equity in your home. Your home’s equity is its value, minus the amount you owe on your mortgage. HELOCs will run for a fixed term, and while the total line of credit available to you may be large, you only pay interest on the amount you actually use, not the full credit line.

Student loans are loans that pay for post-secondary education. These loans can be applied to traditional four-year colleges, online programs, graduate schools, including law and medical schools, as well as trade schools. Some of these loans are made by the federal or state government.    

Private student loans are made by non-government institutions. Private student loans can be larger, but they also tend to have higher interest rates and fewer options for loan forgiveness than government student loans. Student loans from the government tend to be based on income, have lower interest rates than private loans and some have loan forgiveness programs if you work in a certain area or profession for a set period after completing school.

A personal loan is a loan that allows you to spend the loan amount more freely than other loan types.  While mortgages, student loans and auto loans are tied to a specific use, like buying a home or getting an education, a personal loan is not. These loans tend to be smaller than other loan types.

An auto or car loan is a loan used to buy a car. These loans can be made by banks or credit unions, as well as car dealers. Because so many institutions offer these loans, you can save a significant amount of money by shopping around.